Weighing the Options of Refinancing
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It has been said that only if your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That could have been sound advice years ago, but with the fact that refinancing has been costing less in recent years, it is never the wrong time to think about a new loan! Refinancing your mortgage loan has various benefits that can make it worth the initial expenditure several times over.
When you refinance, you could have the ability to lower your interest rate and monthly payment , sometimes significantly. You could also have the ability to "cash out" a portion of your home equity, which you may use to take care of higher interest debt, improve your home, or take a vacation. You may be able to refinance to a shorter-term mortgage, giving you the ability to build your home equity faster.
Fees and Expenses
As you probably expect, you will have to pay for the process of refinancing. With your refinance, you are paying for basically the same things you were charged for during your original mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might think about paying points to reduce your interest rate. When you pay (on average) 3% of the mortgage loan amount initially, the savings for the term of the new mortgage loan can be significant. You may be told that these points can be deducted on your income taxes, but as tax regulations are difficult to keep up with, we urge you to consult your tax professional before considering this in your calculations.
An additional cost that a borrower may take into account is that a reduced rate of interest will lower the interest amount you'll deduct on your taxes. Call us at 701.222.0100 to help you do the math.
Most borrowers find that the monthly savings quickly balance out the initial cost of a refinance. We'll help you determine what mortgage program is the right fit for you, looking at your cash on hand, how likely you are to sell your house in the next few years, and what effect refinancing may have on your taxes. Call us at 701.222.0100 to get started.
Curious about refinancing? Give us a call: 701.222.0100.